US Department Of Labor Accuses Palantir Of Discriminating Against Asians

The U.S. Department of Labor on Monday sued Palantir Technologies, a $20 billion Silicon Valley software company and government contractor, alleging that firm discriminated against Asian job applicants.

In a complaint, the Department of Labor accused the Palo Alto, Calif.-based data mining company of utilizing a hiring process since Jan. 2010 that prevented the hiring of Asian applicants on the basis of their race. Asian applicants were "routinely eliminated" in resume screening and telephone interview phases of the hiring process, despite being "as qualified as white applicants" for engineering positions, according to the complaint.

In a statement, Palantir denied the allegations.

We are disappointed that the Department of Labor chose to proceed with an administrative action and firmly deny the allegations. Despite repeated efforts to highlight the results of our hiring practices, the Department of Labor relies on a narrow and flawed statistical analysis relating to three job descriptions from 2010 to 2011. We intend to vigorously defend against these allegations

The suit comes at a time when the technology industry is often criticized for its lack of diversity. Under pressure from advocates, several major tech companies have begun releasing the gender, age and ethnic makeup of their workforces, showing a dearth of women, Latinos and African Americans. Asians tend to be better represented than other minority groups.

In July, the
Equal Employment Opportunity Commission opened up an investigation for age discrimination at
Google while venture capital firm Kleiner Perkins Caufield and Byers faced intense scrutiny last year after a former partner Ellen Pao alleged gender discrimination.

In its complaint, filed with the Office of Administrative Law Judges, the Labor Department highlighted three instances in which Palantir allegedly did not hire qualified Asian job seekers, including one where 730 qualified candidates applied for a number of "QA Engineer" positions. While 77% of applicants were Asian, the suit said only one of seven people hired was Asian.

Government scrutiny could weigh heavily on Palantir, which the Department of Labor estimates has been party to $340 million in government contracts since the beginning of 2010. By law, government contractors cannot discriminate based on race, color, religion, sex, sexual orientation, gender identity, national origin, disability or against military veterans.

The case could impact Palantir’s ability to secure future government contracts, should a judge decide to bar the company from doing so. Typically, such agreements are for a set amount of time.

“As the complaint indicates, we’re asking for all available remedies in this case,” said Rose Darling, a lawyer for the Department of Labor and the lead attorney in the case a law. “That includes debarment." The sanction would prevent Palantir from securing future government contracts.

At the heart of the case is Palantir's in-house referral system, a common Silicon Valley practice where existing employees nominate candidates they know for openings at a company. The system "often perpetuates whatever inequities the company’s workforce already has," Darling said. "If you are going to use a pool of people to refer new employees, the candidates you get tend to reflect the population of the people referring them. Those systems, when not checked, can lead to freezing out certain groups that aren’t already represented at the company.”

Palantir, which received early funding from In-Q-Tel, the CIA’s venture arm, often attracts top engineering talent from schools such as Stanford University, luring them with potentially lucrative stock options and the opportunity to work on important problems for large corporations and government entities. In a 2013 story, Karp told FORBES that his company often looks for applicants with what he called “superpowers,” or the ability to excel at doing specific tasks. Executives that FORBES spoke to at the time said that the CEO’s own “superpower” was in finding and attracting top engineering talent.

Lawyers for the Department of Labor’s Office of Federal Contract Compliance Programs laid out their case against Palantir to the company almost a year ago, in Oct. 2015. Since then, both sides have been in settlement negotiations, essentially, to reach a resolution. “In this case, we came to an impasse,” Darling said, adding that spending a year on settlement negotiations was typical for the agency.

Palantir has 25 days to respond to the complaint.

Follow Ryan on Twitter at @RMac18 or email him at rmac@forbes.com. Follow Matt on Twitter at @MattDrange or email him at mdrange@forbes.com.